troubles continue to mount relentlessly as it faces the prospects
of a massive slump in life and annuity sales in 2009 and
beyond.
The 158 year old Hartford,
Connecticut-based insurer’s new sales prospects were dealt a severe
blow in early-March when composite insurer State Farm announced
that it had suspended distribution of Phoenix’s products
indefinitely, citing downgrades by rating agencies as its primary
reason for doing so.
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A distributor of Phoenix’s products since
2001, State Farm was responsible for a large portion of Phoenix’s
sales – 68 percent of its annuity sales and 27 percent of its life
insurance sales in 2008.
Adding another harsh blow, a second unnamed
“major distribution partner” is also suspending sales of Phoenix’s
products, according to rating agency Moody’s which anticipates that
additional distributors may follow suit.
Phoenix’s product sales were already under
pressure in the fourth quarter of 2008 with the insurer reporting
annualised life insurance sales of $40.3 million, down 71.4 percent
compared with the fourth quarter of 2007.
Annuity deposits fell from $196.4 million in
the fourth quarter of 2007 to $123 million in the fourth quarter of
2008, a decline of 37.4 percent.
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By GlobalDataFor the full year Phoenix reported annualised
life insurance sales of $278.2 million, down 21 percent compared
with 2007, and annuity deposits of $622.5 million, down marginally
from $627 million in 2007.
Phoenix’s total revenue in 2008 fell 15
percent compared with 2007 to $2 billion while total assets fell
from $30.42 billion to $25.77 billion.
Phoenix incurred a net loss of $726 million in
2008 and ended the year with a net unrealised investment loss of
$1.645 billion.
“Based on the composition of its investment
portfolio, Phoenix is likely to experience near-term higher levels
of economic losses,” noted Moody’s.
In the wake of these developments Moody’s has
downgraded Phoenix’s primary operating company Phoenix Life’s
insurance financial strength rating to Baa2 from Baa1 with the
outlook on the rating negative.
Moody’s rating criteria states that insurance
companies rated in the Baa range offer “adequate financial
security.”
